Oak Enterprises Has a Beta of 1

question 71

Multiple Choice

Oak Enterprises has a beta of 1.2, the market return is 8%, and the T-bill rate is 4%. Its tax rate is 21%. What is its expected required return of common equity?

• A) Between 11% and 12%
• B) Between 8% and 9%
• C) Between 7% and 8%
• D) Between 5% and 6%

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Definitions:

Advances

Forward movements or improvements in a field, or money provided upfront before receiving goods, services, or earnings.

Technology

The application of scientific knowledge for practical purposes, especially in industry.

Production Enhancement

Strategies and methods employed to increase the efficiency, output, or quality of products in a manufacturing or production process.

Affluent Society

A term describing a society that has a high level of wealth and consumption, often associated with high living standards and disposable income.